Windows Small Business Server had its start in 1997 as BackOffice SMS 4.0 and included early server apps like Exchange 5.0, IIS 3.0, SQL 6.5, and Proxy Server 1.0. If you track the history of SBS, you can see its evolution into Windows Server and server applications like Exchange, SharePoint Services, Proxy into ISA, SQL, Windows Update Services, and more. The 2011 edition of SBS has two flavors: one a traditional on-premises offering, and one with an eye on cloud services.

SBS 2011 Standard: Built on Windows Server 2008 R2, this is a tool for the small-business owner with fewer than 75 users or devices. For administrative purposes, you need an individual with basic jack-of-all-trade knowledge of Active Directory, DNS, IIS, DHCP, and file sharing. Additional server applications include Exchange 2010 SP1, SharePoint Foundation (the update from Services) 2010, and Windows Software Update Services. Pricing for SBS 2011 Standard is about $1,000, with client access licenses running around $72.

SBS 2011 Essentials:Originally code-named Aurora, the concept is simple in that it is built for home offices and small businesses; it allows for as many as 25 users. Rather than running the heavy-hitting server applications on a PC server, those tools reside in the cloud under an Office 365 hosted service of email, collaboration (through online SharePoint), and CRM.

Accompanying the Standard and Essentials versions is the special Premium Add-on, which consists of support for SQL Server for line-of-business applications (it includes SQL 2008 R2 for Small Business) and Hyper-V.

Windows SBS 2011 is an excellent step in the right direction for Microsoft and for the SBS line. Previously, Microsoft tried to move into midsize companies through its Windows Essential Business Server, but when it became clear that the market didn't need a product line between SBS and Windows Server, Microsoft pulled the plug on WEBS. Instead, the company reached into the cloud and tapped an in-house directory service. That is, Microsoft came up with SBS Essentials, which I believe is an experiment in small cloud-based solutions with the intent of one day of delivering a single, hybrid (on-premise/cloud) version.

The one frustration I have is that there isn't an easy way for existing SBS Standard users to upgrade to the new Essentials version. That may assuage Microsoft partners fearful of cloud-based competition, but it isn't a smart move in terms of satisfying the customer. Perhaps as Microsoft gets more experience with the cloud via SBS Essentials, Office 365, and other offerings, it'll stop the dual approach.

Or perhaps there will always be a place for both cloud and on-premise versions, and Microsoft simply is serving both needs. What do you believe? Do you think we will always need a traditional on-premise SBS with all the add-on apps?

J. Peter Bruzzese is a six-time-awarded Microsoft MVP, currently for Office Servers and Services and previously for Exchange/Office 365. He is a technical speaker and author with more than a dozen books sold internationally. He's the co-founder of ClipTraining, the creator of ConversationalGeek.com, instructor on Exchange/Office 365 video content for Pluralsight, and a consultant for Mimecast and others.